Dividend policies of Maltese listed companies : an assessment

Abstract

The main objective of this dissertation is to study the dividend policies of the companies that are listed on the Malta Stock Exchange. In a private company, the dividend policy is usually regulated by the needs of the owners who are normally the same people who manage the company. However, in the case of a public listed company one has to face the general public shareholders' expectations. Thus, the board of directors has to consider what dividends to recommend. On the other hand, in a private company the amount of dividend distributed does not have any consequences because the public is not aware of the company's dividend policy This dissertation is to study the dividend policies of Maltese listed companies and enquire, in particular: • Whether such companies have an established dividend policy. • Whether the dividend policy is communicated to the public. • Whether dividend policies changed since or because of listing on the Stock Exchange. • What factors they consider important in their dividend decision. • The significance they place to dividends and retained earnings. • How dividend policies are likely to be in the future. The following are the major findings: • It is apparent that in the past, the dividend policy of the three commercial banks used to be influenced by the needs of the Government. • In most cases, the dividend pattern prior to listing was more volatile than that after listing. Besides, reductions in dividends rarely occurred subsequent to listing. • The majority of the listed companies affirmed that the dividend policy has not changed because of listing on the Stock Exchange. Notwithstanding this, there was general agreement that the dividend policy became more sensitive to shareholders' expectation due to listing. • Not all listed companies set out their dividend policy in writing. • Listed companies refrain from communicating their dividend policy to the general public due to the sensitivity of the market affecting the share price.